Income, debt, and mortgage payments are the primary factors that affect whether you qualify for a loan. If you do qualify for a loan, you can apply and the mortgage lender will move to the next step of checking to see if you can be approved.
To determine your qualification, the first thing a lender will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your housing-to-income ratio.
If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your debt-to-income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan.
The limits within which your housing and debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the loan-to-value ratio, or LTV). This loan-to-value ratio is one of the most important factors in determining a home loan.